Accounting & Tax

CA May Restate Results Again

One newly emerging issue concerns stock-option grants as far back as fiscal 1997.
Stephen TaubJune 30, 2006

CA has disclosed further accounting problems.

The software giant — still struggling to put behind it a major accounting scandal, when the company was known as Computer Associates — failed to meet its extended, June 29 deadline for filing its 2005 annual report after discovering two new issues that could result in restatements.

One issue concerns stock-option grants as far back as fiscal 1997. CA stated it experienced delays of as long as two years from the date option grants were approved to when they were communicated to individual employees.

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As a result of those delays, the company may need to recognize additional noncash stock-compensation expense over the grant vesting periods. The company estimates the pretax amounts for fiscal years 2005 and 2006 to be less than $20 million per year; for fiscal 2002 through 2004, between $40 million and $100 million per year; and for fiscal 1997 through 2002, a total that could exceed $200 million. The company added that it still has not reviewed stock-option grants prior to fiscal 1997.

The other issue concerns CA’s continuing review of certain software-license contract renewals. The company said that it understated subscription revenue recorded in years prior to fiscal 2006 by roughly $40 million. These adjustments, which will result in reductions to subscription revenue in future periods through roughly 2011, represent a further adjustment to the amounts restated last October.

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